Wheat prices surge after Russian export ban

Russian Prime Minister tried to ease growing fears of food shortages due to drought driven harvest failures by banning exports of the grain. Wheat prices went up to two year highs.

Drought and the fires resulted in a sharp drop in wheat production in Russia, which last year exported a quarter of its output of the grain.

'I think it is advisable to introduce a temporary ban on the export from Russia of grain and other agriculture products made from grain,' Russian Prime Minister Vladimir Putin said.

Wheat for December delivery jumped past $8.15 a bushel to its highest level since August 2008 at the Chicago Board of Trade, one of the main exchanges for trading the grain, after Putin's announcement.

Other commodity prices have also been rising partly due to the knock-on effects of higher wheat prices.

Barley (for beer production) and corn have gained in price and the higher price for feed wheat could also result in food companies having to increase milk and meat prices.

However, many wheat users have bought their raw materials in advance and the higher prices will only slowly seep through into food prices.

Wheat only takes up a small portion of the ration for many animal feeds. But retailers could take advantage of the sentiment and artificially raise prices for food.